Rowans-blog

Thursday, February 26, 2015

I hope, and indeed, I hope I am not alone, when I say
that I believe that the tide isbeginning to turn as far as official concern regarding banking
wrongdoing is concerned.

I am starting to sense a stiffening of the sinews among
those responsible for over-seeing the activities and the actions of the banks,
and although the stirrings are small at present, I hope that they will continue
to increase, as more and more, those responsible for banking management, are
required to give an account of themselves.

Yesterday 25th February, saw an interesting
example of what I mean.

Douglas Flint, Group Chairman, HSBC Holdings plc, and
Stuart Gulliver, Group Chief Executive, HSBC Holdings plc, were called
to make such an account before the House of Commons Treasury Committee.

After the usual pleasantries and thanks for coming, the
Chairman, Andrew Tyrie asked Stuart Gulliver straight out to explain why with
regard to his tax affairs, he had felt it necessary to put in place ‘such an extraordinary
complex offshore structure with a Panamanian company’.

Once we had got past the self-serving and pious
outpouring of a ritualistic apologia, for the ‘unacceptable conduct’ of HSBC in
the past years, a statement which sounded as if it was being read from a lawyer’s
briefing, the first thing we learned from this statement was that Stuart Gulliver,
despite having been born and brought up in England, was now a Hong-Kong
resident, with property in Hong Kong and thus considered as domiciled in Hong
Kong.

Thus began a most convoluted search for the real Stuart
Gulliver, who is he, what does he do, where is he a tax payer etc?

Chairman Andrew Tyrie repeated his question to Gulliver
why he had felt it necessary, as a Hong Kong domiciled person, to have a
Panamanian company incorporated in his Swiss-based structures.

Gulliver was immediately at great pains to say that this
structure was not used for tax purposes, in fact he protested this at least 4
times, although no-one had alleged any wrong-doing regarding tax issues.

He was like the man arrested by the Flying Squad in the
early hours of the morning who, when questioned at the police station, but before
any direct allegations are put to him. the first thing he says is ‘well I haven’t
been doing any robberies’!

Gulliver
was listed as the beneficial owner of an account in the name of Worcester
Equities Inc, an anonymous company registered in Panama, containing a balance
in 2007 of $7.6m.

It was through this entity that Gulliver’s HSBC bonuses were
paid until 2003. It was subsequently closed in 2009. He also held a second
account in the name of Worcester Foundation, which had been closed before 2007.

Although
now based in the UK, where HSBC has had its headquarters since 2003, Gulliver
is domiciled in Hong Kong for legal and tax purposes.

So let us look at what HSBC had been doing during these
years with a specific focus on tax arrangements.

The
Guardian reports that HSBC’s Swiss bankers had been aggressively marketing a
device that would allow its clients to avoid a new taxation facility,the
European Savings Directive, introduced under a treaty Switzerland signed with
the European Union, the HSBC files reveal.

The
documents show for the first time that rather than acting as a passive party to
the tax schemes of its clients, HSBC Suisse proactively contacted clients to
market techniques that would have effectively sabotaged the tax treaty deal.

The
bank’s activities around the treaty, which related to the EU-wide European
savings directive (ESD), now form the core of the criminal investigations into
HSBC’s activities in France and Belgium, both launched due to the leaked
documents.

The
treaty, signed in 2003, allowed EU citizens to carry on hiding billions in
anonymous Swiss accounts. But in return, Swiss banks such as HSBC’s would be
obliged to collect some tax from each of their secret customers.

This
“withholding tax” on the income from savings interest, initially 15%, would
then be handed over in bulk to Britain and other EU states, to compensate them
for losses caused by anonymous tax dodgers.

But HSBC
came up with a “vehicle” that enabled customers to avoid the tax by exploiting
a key loophole in the treaty: ESD only applied to individuals’ savings, not
companies.

So the
bank offered to transfer all of a customer’s secret cash into a corporate
account with no genuine trading activity.

This
would technically belong to a shell company, set up in such secretive offshore
havens as Panama or the British Virgin Islands. To be doubly sure, the company
itself in turn could, for a further price, even be registered as technically
owned by an offshore trust or foundation, generally in the tiny principality of
Liechtenstein, where details of the trust deed could be kept completely secret.
The customer would be written in as the “beneficiary” of the trust, but not the
legal owner of the company.

In return
for paying several thousand pounds in annual fees to the bank, the rich clients
could carry on enjoying the secret fruits of their cash, tax-free. One such BVI
sham entity was even wittily named Alter Ego Ltd.

It may be purely
coincidental, but it is of interest to note that Stuart Gulliver was Chairman
of HSBC Private Banking Holdings (Suisse) SA from February 2010, but he had
been a Director since September 2007.

To a possibly unsophisticated eye, unfamiliar
with such fiscal niceties, it might look remarkably like Gulliver was taking
advantage of such protections, so why would he need such corporate secrecy protection?

He told
the committee yesterday that it was merely for secrecy so that his Hong Kong
colleagues would not know how much he was earning! He repeated that it had
nothing to do with tax!

The
Guardian had also asked this question in the last week.

In response to queries from
the Guardian about his personal account as revealed in the leaked files, a
representative for Gulliver said he had made use of HSBC Suisse to hold his
bonus payments prior to 2003, when he moved from Hong Kong to London.

Lawyers for Gulliver said
that Hong Kong tax had been paid on this income – and explained that he
“followed this procedure because he wanted his taxed bonus earnings to remain
private from his then colleagues in Hong Kong, which they would not have done
if he had kept them in an HSBC Hong Kong account”.

The Guardian asked Gulliver
why he used a Panamanian company to hold the funds, given Swiss accounts
already offer secrecy. His lawyers declined to answer.

Gulliver now claims that a
computer programme in use in the bank would have allowed colleagues to know how
much he was earning, which he wanted to avoid!

Gulliver’s legal
representatives added that his Swiss accounts have “for a number of years” been
voluntarily declared to UK tax authorities. They declined to specify the exact
date they were first declared.

Gulliver is also among those
current and former clients of HSBC Suisse to take advantage of non-dom status.
Gulliver is a registered non-dom based on his long residence in Hong Kong – now
a special administrative region of China – which he considers to be his home,
despite his UK-based position.

A representative for Gulliver
said: “Having lived there since the 1980s, our client has become a permanent
Hong Kong resident with right of abode, as has his wife who is an Australian
national. Hong Kong continues to be their home albeit that our client now works
primarily in the UK. As a matter of law, our client is domiciled in Hong Kong.”

Non-dom status can confer
several tax advantages on those who claim the status compared with those
domiciled in the UK. These include advantages in how inheritance tax is
applied, but can also exempt worldwide income earned from outside the UK from
incurring UK taxes – a system known as the remittance basis.

Gulliver’s lawyers confirmed
he was “entitled to claim the benefit of the remittance basis”, but did not say
whether or not he did so. (We now know he does, he said so to the Committee
yesterday). If Gulliver were on the remittance basis, he would not need to pay
tax on investment income held outside the UK – which would include holdings in
Swiss bank accounts.

It may well be that this
feature is an important explanation in this conundrum! A man in Gulliver’s
position might well be expected to have a substantial share and equities
portfolio, and it is perfectly possible (and reasonable) that it is held and administered
by the Swiss Bank facilities.

A representative for Gulliver
said that he had paid all relevant income taxes: “Full UK tax has been paid on
the entirety of his worldwide earnings less a credit for tax paid additionally
in Hong Kong (where he is also tax resident) on that part of the same earnings
doubly taxed.”

If he truly does possess
non-dom status, this does not make a great deal of sense, because he would only
be liable for income or dividends he earned in the UK or remitted to the UK,
and rich men, particularly rich men with non-dom status are very careful what
they remit to the UK. So although he states (I believe truthfully) that he pays
UK tax on the entirety of his world-wide earnings, why would he do this when he
doesn’t have to? What we don’t know is how much those earnings are calculated at
and how much the tax paid amounts to!

Gulliver
is a bit of an international tax gypsy, in that he seems to have a number of
convenient international addresses for specific purposes. Let us have a look at
some of them.

First of
all, Gulliver is now described as Group Chief Executive, HSBC Holdings plc,
well that’s pretty clear, I suppose. And as Group CEO he would earn a salary on
which he would pay tax in the UK, so far so good! It is understood that he
lives in the Uk at the present, he uses a chauffeur-driven car provided for him
by HSBC when he needs it.

Except
that Gulliver does not have a contract with HSBC Group as such!

The
Guardian has established a separate employment route.

Gulliver, HSBC's highest paid
banker was on a £10m deal in 2009, and was not employed by the bank's main
holding company at all, despite taking over as chief executive.

The British-born executive
who has spent 20 of his 30 years at the bank working outside the UK, is only seconded
to work for HSBC Holdings – the overall operation – through a Dutch-based
company called HSBC Asia Holdings.

His contract, seen by the
Guardian, shows that his principal place of work is Hong Kong, where the bank
moved the office of the chief executive in 2010.. HSBC Asia Holdings has an Amsterdam
address.

The contract, signed in February
2011, also shows that he expected to pay income taxes in Hong Kong and Britain
– with the bank paying for him to receive advice on filing tax returns in both
places.

Gulliver's contract gives his
address as the main HSBC Hong Kong office in Queen's Road Central, and confirms
he is on a £1.25m salary. He is also entitled to an additional 50% as a
contribution to his pension. About £375,000 is paid into a Jersey-based defined
contribution scheme called Trailblazer while the remaining £250,000 is paid in
cash.

Gulliver has been employed by
the bank since October 1980 and is one of 443 HSBC bankers who are also
employed through the Amsterdam offshoot, which HSBC said is designed to allow
them to continue to receive benefits and pension entitlements regardless of
where the bank – which has operations in 87 territories – locates them.

As far as can be ascertained,
Gulliver, on the face of what is known and disclosed, has done nothing wrong or
illegal. His non-dom status would give him significant tax advantages, and
there is nothing illegal about his ownership of a Swiss Bank Account as long as
it is fully disclosed to the UK HMRC.

But this is not the point
really. What is the point is that yet again, the average UK citizen sees yet
another example of a banking fat cat, during a time of terrible austerity,
presiding over a banking entity for which he has to go in front of a House of
Commons Select Committee and apologise for conduct and behaviour which is now
considered to be unacceptable, conduct and behaviour which was in so many
cases, criminal, but which presumably, at the time it was being carried out,
was helping to contribute to Gulliver’s bonuses.

Some of the unacceptable
activity, being the facilitation of tax evasion and the laundering of the
proceeds, presumably took place, at least in part on Gulliver’s watch while he
was a Director.

They see him being quizzed by
MPs as to how he structures his own financial affairs, and they learn that
despite being British to all extents and purposes, (he lives in Kensington), he
and his wife enjoy significant beneficial non-domiciliary status, a tax privilege
denied to ordinary UK residents.

He states he pays UK tax on
his world-wide income, but he is not obliged so to do under his non-dom status,
only on earnings he generates in the UK, or on any earnings abroad he remits to
the UK. On paper, this sounds very generous, but wait, he is not employed in
the UK, he is employed theoretically by a Netherlands company, and we are not
told where or when his salary is taxed or paid. It might, for all we know, be
paid in Hong Kong or into some other tax-efficient facility, with only some
money being remitted to the UK, on which he then does pay UK tax. Nothing
illegal about that!

During the Committee
hearings, the Chairman read out a list of cases in which HSBC had been involved
or were still being investigated for financial criminality and it made very
sorry reading. Yet Mr Gulliver still manages to maintain an enviable income and
lifestyle, while no evidence of wrong-doing or responsibility seems to stick to
him.

Yet, ever the eternal
optimist, I do sense, from the questions being asked by the Committee, that
some of our Parliamentarians are finally getting the horrible message, that our
banking sector, and some of our proudest banking names are little more than Mafiosi!

Monday, February 23, 2015

I doubt there is anyone (apart from the City criminal practitioners
themselves) who would say that we don’t have a major problem inside our
financial sector and the way it is administered.

Recent examples of massive wrongdoing by HSBC in providing
and maintaining facilities to encourage tax payers to evade taxes and launder
money out of their home jurisdictions, is merely the latest example of
financial criminality, by a financial institution against the financial
interests of the State. This was a conspiracy to defraud the Revenue, pure and
simple, and HSBC have defined themselves as criminal enemies of the State!

There cannot be another market sector where such a huge
volume of fraud, financial malpractice, dishonest conduct, and downright
crookedness is practised , but where so little is done to check its influence.

If these crimes were being committed by any other sector of
society, you may bet the farm that the Government would have mobilised an army
of investigators to prosecute them!

Every proposal made to bring any kind of formal oversight to
the control of the financial market however, is met with howls of protest and
acres of newsprint as the City marshals its army of supporters in the media,
the law firms, the accounting and consulting practitioners, to say why any kind
of intervention or new regulation is wrong in principle, will drive business
out of the City, and will be met by mass banker defections to other
jurisdictions.

One of the reasons why the City gets away with this exercise
in special pleading is because it has always managed to marginalise the views
of any person whose opinions they do not like, whose theories do not match
theirs exactly, who say anything other than that which is the accepted wisdom of
the milieu, or whose attitudes differ in the slightest degree from those accepted
by the City insiders.

Anyone whose views are informed but who has never worked
inside the City can be ignored on the basis that they have no empirical
knowledge on which to base an argument. Those whose views cannot be ignored are
qualified as being ‘out of date or embittered’.

The City likes to be able to say, when dealing with overt
wrongdoing, ‘...well, that was what things were like a few years ago, but of
course everything has now changed...’ Those of you who read the HSBC full page
advert last week will instantly recognise the model!

Nevertheless, this ability to simply ignore and brush off
the words or opinions of others, is a very powerful weapon in their armoury,
and they use this marginalisation process ruthlessly.

They do it through the age-old method of ‘taking soundings’
or ‘consulting widely’. In other words, whenever an issue that is likely to be
possibly contentious looks like arising, the powers that be within the Square Mie
will ring round their friends and colleagues and agree an accepted line of
approach, so that it cannot be said that anyone inside the magic circle was
taken by surprise.

This method of getting agreement on policy issues is of long
standing and works very efficiently.

Government understands this only too well, and doesn’t seek
to impose too high a degree of determinism when it comes down to gaining the
City’s approval of policy.

During the PPI farrago, when the banks had been caught with
their grubby fingers in the till over the fraudulent sale of PPI insurance
contracts, the Government worked assiduously with the City to find ways of
downplaying the possible consequences of the public perception of what had been
going on.

Instead of calling the PPI era by its proper name and title
which was ‘institutional fraud’, the Government re-named the practice as
‘Mis-selling’, a legal fiction, hitherto unknown to English jurisprudence.

Well, you couldn’t really let it be known that the British
banks had been engaging in an orgy of theft and fraud at their client’s
expense, could you? It would have sent a lot of wrong messages to others
elsewhere who might have thought twice about investing their money in the UK!

No, far better to call it ‘mis-selling’, whatever that might
mean, and allow others to form their own view. Mis-selling sounds so much more
benign than ‘stealing’ or ‘fraud’.

Another technique the City uses to avoid the consequences of
its misbehaviour is to claim and feign ignorance of the actual mal-practice being
carried out, so that if anyone asks the awkward questions, the matter can be
denied on a stack of bibles. You will have seen this repeatedly used by senior
bankers as the details of the Libor fiddles, and the Forex scams leaked out
recently. Suddenly, all these very high-powered bankers whose job it was to
ensure the profitability of their institution, were denying any knowledge at
all of the egregious techniques of enrichment alleged.

It is this power to ignore the obvious and pretend it isn’t
happening and then denying all knowledge of its occurrence that gives the City
its almost supernatural powers of survival.

I talked recently to a young academic who questioned whether
there was any real point in advertising the City’s erring ways. His case was
that there was no value to be obtained in prosecuting and convicting bad
bankers because the adverse publicity would have a negative effect upon the
willingness of outsiders to want to invest in London as a centre of integrity.

I pointed out to him that this was precisely what worked to
prevent bankers from cheating and stealing in the first place if it was known
that their bad behaviour would be publicised and attract attention.I quoted Justice Louis D Brandeis’s famous
aphorism to him – “..."Publicity is justly commended as a remedy for
social and industrial diseases. Sunlight is said to be the best of
disinfectants; electric light the most efficient policeman."

But after our conversation, I realised that of course,
preventing transparency and covering up wrong-doing is exactly what the City
criminal advocates. Anyone who suggests that to seek to hide the City’s crimes
is in the best interests of the body politic is merely inviting more criminals
to come in and and steal.

And this leads me to another of the City’s favourite
practices, which is ignoring anyone who isn’t in their club of thieves and
fraudsters.

This means that British bankers can routinely ignore any
other agency of control which operates outside the UK, because they do not
concede that they might have any influence over the British way of conducting
business.

So it is that when another regulator in another country
proposes involving themselves in the affairs of a British bank, they are met
with significant opposition, and more recently, with abuse. Take the case of
Ben Lawsky.

Benjamin Lawsky heads a new
financial regulator in New York called the Department of Financial Services (DFS).

He investigated Standard
Chartered Bank and accused the bank of conducting secret money laundering
transactions with Iran, triggering a 23.5% drop in share price. On August 14,
2012, Standard Chartered Bank agreed to pay a fine of $340 million (£220
million) to the New York State Department of Financial Services, conceding that
$14 million in financial transactions involving Iranian parties were in
violation of U.S. banking laws.

On June 18, 2013, the
Department announced that Deloitte Financial Advisory Services LLP (“Deloitte
FAS”) was fined $10 million and banned from advising banks in New York for one
year after accusing the firm of watering down a report about money-laundering
controls at Standard Chartered.

He is noted for targeting
individuals within the financial sector who commit wrongdoing, and not merely
handing out fines to the companies they work for, an approach he explains as
follows: "Corporations are a legal fiction. You have to deter bad
individual conduct within corporations. People who did the conduct are going to
be held accountable.”

Benjamin Lawsky is a very
powerful entity indeed, with a world-wide brief. He is someone to be taken very
seriously because he has the power to suspend or remove an individual bank’s
licence to clear US dollars in New York. This is the banking equivalent of the
kiss of death to any institution, should Mr Lawsky choose to exercise his
powers, and any foreign bank which has engaged in international acts of egregious
criminality could easily find itself on the receiving end of an order from
Benjamin Lawsky inviting them to contemplate their banking future, but without
the ability to clear US dollars.

Standard Chartered Bank, back
in 2012, made a promise to behave itself in future when it bought its way out
of a New York Department of Financial Services investigation into its affairs.
The bank ended up paying a total of $667 million in fines and became the
subject of a Deferred Prosecution Agreement to get out from under the threat of
further investigation.

All it took to return in
front of the Department was its failure to fully keep that promise.

At a public meeting following
the report of the findings and the agreement, questions were asked concerning
individual employee conduct and compensation following the deferred prosecution
agreements. the Chairman, Sir John Peace had replied, when asked about bonuses
for executives: "We had no wilful act to avoid sanctions; you know,
mistakes are made – clerical errors – and we talked about last year a number of
transactions which clearly were clerical errors or mistakes that were
made."

This was not what had been
agreed with the New York Authorities, and the words used sought to ameliorate
the egregious conduct complained of. This wilful refusal to acknowledge the truth
of the Deferred Prosecution Agreement resulted in an immediate riposte from the
US Authorities, and later, Sir John Peace, was forced to retract his comments
describing the breaches as "clerical errors" and apologised for
describing them as not "wilful acts" after US regulators were
infuriated by his comments at the bank's full-year press conference.

City banks are not accustomed
to being treated like that by mere regulators. The FCA usually knows its place
in these matters and never usually makes too great a degree of trouble for the
banks being disciplined. Well, the Americans are different!

Back in 2014, Ben Lawsky was
invited in his official capacity to attend a conference/seminar evening in
London and to make a short talk to an invited London audience of British and European
bankers, on the subject of "Consumer Financial
Protection & Enforcement".

The organisers had also
invited some other US speakers, Mr.
William K. Black – former US Regulator involved in cleaning up the
Savings and Loans Scandal in the late 1980's, and Mr.Neil Barofsky, formerly the the
Special US Treasury Department Inspector General overseeing the Troubled Assets
Relief Program. From the UK, Mr. Martin
Wheatley, the Chief Executive Officer of the UK's Financial Conduct
Authority and Mr. David Green CB
QC, the Director of the UK's Serious Fraud Office were invited to take part.

This would
have been a very interesting and valuable exercise in hearing from the
Americans how they viewed and intended to view further examples of criminal
behaviour which had an impact on US markets, and would have provided the
invited audience with some insights into US regulatory thinking in this sphere.

Imagine the
surprise on the part of the organisers of the event therefore to receive an
email from the FCA quite late in the day, saying;

“...Thank
you for requesting an FCA speaker for your event.

“...(We
apologise for the delay in our response but a lot of consideration was put into
your request and so a number of people needed to be consulted for their
opinion.)

“...We
have considered your request but unfortunately, on this occasion, we are unable
to provide a speaker. The FCA is extremely busy at present and we are being
more stringent in the assessment of requests and use of our resources...”

You
will not be surprised to learn that the conference did not go ahead!

You
will note that the FCA had adopted the traditional policy of ‘deep consultation’!
Quite why the FCA, the lead regulator needed so much time to consult on the
question of sharing a platform with Mr Lawsky, I simply cannot fathom.

What
does come across in a highly amplified form is the absence of any of the usual
courtesies which would normally be paid to a visiting regulator from a leading financial
centre, and someone with so much power in the regulatory field.

Not
to be able to field one representative of sufficient authority from the FCA to
share a platform with Mr Lawsky cannot be considered to be anything other than
the height of professional rudeness, and a deliberate slap in the face to him,
his office and by extension, to US regulators more generally.

No
doubt Martin Wheatley felt he had dodged a bullet by refusing to speak at this
event, but the whole affair speaks volumes about the way in which the British
Regulatory environment views itself and the way in which it conducts business.

It
is this kind of behaviour which enables the British financial sector to turn a ‘Nelsonian’
blind eye to the actions of other regulators and enables them to pretend that
they are immune from other regimes.

In
a similar case, some years ago, John Moscow, a New York specialist white collar
prosecutor was addressing a British audience on the subject of the rogue bank
BCCI. This Pakistani-owned bank had been operating from London for years and
had engaged in singular levels of criminal activity of many kinds. The New York
Authorities were on the verge of taking swingeing legal action against the bank
and its people, and Mr Moscow had attended a conference in Cambridge to liaise
with UK investigators and prosecutors.

In
his presentation, Mr Moscow warned the British banking regulators present on
the dangers of continuing to fail to take appropriate action against BCCI, even
when they were well aware of many of the dishonest activities that were being
perpetrated there.

He
said, (when talking about BCCI); ‘...It will be of no use trying to sweep this
one under the carpet...If you do, there will be no room left between the carpet
and the ceiling...’

Such
a warning is even more appropriate today, and after the latest exposees
regarding HSBC, need to be taken very seriously indeed! Snubbing a New York
prosecutor in future isn’t going to cut the mustard!

Thursday, February 19, 2015

It
is reported in the Guardian of 16th February 2015 that you have
rejected calls for an inquiry into the handling of 3,000 suspected tax evaders
with accounts at HSBC’s Swiss private bank, which has only yet led to one
prosecution..

Your
spokesman said officials had done what they could to make sure people paid up
and argued it was “right that HMRC prioritised collecting revenues” before
bringing cases where they could work with prosecuting authorities.

It
is reported that the Treasury is coming under increasing pressure to explain
why HM Revenue & Customs did not pursue those suspected of criminal evasion
more vigorously.

The
arguments that HMRC and Treasury ministers claim that France put restrictions
on the use of the leaked HSBC files, which have only just been eased, are
frankly specious. This claim was countered last week by the French finance
minister who suggested the UK could have found ways to pursue criminal cases,
if they had really wanted to!

When
you were asked whether you were happy with the UK tax authorities’ handling of
the leaks, your spokesman said: “...HMRC, as I see it, took the information
that they had, they went through the 6,000 or so cases, they whittled that down
to 3,000 specific ones to look at, went after those who were non-compliant to
recoup them and launched prosecutions where they could. So they did look at and
take forward action on prosecutions when they went through this HSBC data...’”

...“HMRC went after those that were not
compliant and focused on making sure that those people who had not paid the
taxes that were owed did so … The people who should have paid tax have had to
pay tax. And then they did what they could with the restrictions that were
imposed on them by the French on the information which has led to one
prosecution so far. Clearly those restrictions have now been eased and, as HMRC
said last week, they will therefore continue to have discussions with
prosecuting authorities about any further action that should be taken...”

In
this answer, all you have done is to parrot and replicate the words provided by
HMRC, you have not said what you really feel at all, and that is what causes me
and hundreds of thousands of people like me to wonder about your commitment to
dealing with financial crime at all.

This
is a very serious electoral issue for me and those who share my views. We believe
that you and your Cabinet are not serious about dealing with financial crime,
and particularly when it takes place in the Banking and Financial sphere.

You
give few impressions of concern any time another scandal breaks in the banking
sector. You never make any comment about the amount of criminal money that is
flooding into London and being invested in high value properties; you rarely
comment when banks are exposed committing very serious criminal offences,
whether it be in the provision of worthless insurance policies to hapless bank
clients, or the criminal manipulation of important global benchmarks such as
Libor, or even the wholesale criminal dealings in foreign exchange accounts.

Oh
you may make the odd off-the cuff remark to News at Ten saying how you expect
cases to be investigated by the relevant authorities, but in areas of financial
and white collar crime, particularly in the banking sphere, where any
law-abiding citizen ought to be able to expect the Prime Minister to raise
important issues of grave concern, you either remain resolutely silent, or you
talk rubbish.

Entitled
‘On banking, David Cameron is clueless’, one short paragraph will suffice to
give a taste of Ian’s concerns about your lack of expertise.

“...These
are just some of the reasons why my jaw hit the floor when I heard Cameron’s
remarks about the banking sector on Tuesday morning. He came over as so glib,
so blandly complacent, and so ill-informed it bordered on the terrifying...”

George
Osborne, it is true, in a speech to the Mansion House in 2014 said; “...The
integrity of the City matters to the economy of Britain. Markets here set the
interest rates for people’s mortgages, the exchange rates for our exports and
holidays, and the commodity prices for the goods we buy. I am going to deal
with abuses, tackle the unacceptable behaviour of the few and ensure that
markets are fair for the many who depend on them...”

All
very impressive, except that it doesn’t mean anything, it is just rhetoric and
hot air!

Yes,
after the Libor scandal, in a huge brouhaha, the Government brought in a new
criminal offence of reckless misconduct for senior managers whose actions lead
to bank failure, with a maximum penalty of seven years jail and/or an unlimited
fine.

But
when you drill down into the granularity of what that really amounts to, anyone
with any legal knowledge at all can see immediately that that offence is so
unlikely to be ever charged, that it is merely an illusion of doing something,
and not a reality at all. It is frankly deceitful, and makes me and other like
me really wonder where your true motives lie?

I
have written a number of times before that the conditions precedent that
surround that new law are so onerous and will be so difficult to achieve as to
make the law frankly unusable. It is a bad law and all lawyers know that bad
law is worse than no law at all.

What
makes it worse is that we already had perfectly good laws that could, and
should have been brought to bear immediately. In the Libor cases, selected
charges of false accounting under section 17 of the Theft Act 1968 could have
been brought within weeks against a number of practitioners.

It
is speed of action from detection to charge and trial that provides one of the really
big disincentives to white collar criminals. There was nothing to stop the
Police or the SFO from getting in and acting swiftly and decisively because
huge volumes of personal admissions by traders were all captured on the
in-house compliance tapes which recorded telephone calls coming into and
leaving the building in which the traders were housed.

One
of my students was employed in a temporary job to listen to these tapes, and
she found them truly shocking in the way the individual traders boasted to each
other of the ways in which they had cheated the system and made money. These
were primary evidence, which when played back to the accused would have proved
devastating in interview, so why was the matter allowed to drag out and drift
for ages before the SFO were brought in?

Surely
it wasn’t the old tactic of allowing a lot of time to lapse so that the public
would begin to forget the issue and it would fall out of people’s consciousness?

Of
course, all your friends in the City would love that to be the case. Your dinner
mates down at the Mansion House would be happier if cases like this never came
to public attention at all, while those who are busily making shed-loads of money
like the hedge fund managers, who may well prove to be implicated later, would
be pleased if the heat was allowed to evaporate from the events.

After
all, it’s a bit difficult to be a donor to the Tory party all the while one’s
affairs might be under the spotlight.

As
far as the latest HSBC scandal is concerned, well this is just another same
old, same old, from the Bank that likes to say ‘Yes’to every money launderer, drug trafficker or arms
dealer. I don’t recall you making any public statement of concern or expressing
your unhappiness when HSBC agreed to pay a
record $1.92 billion in fines to U.S. authorities in 2012 for allowing itself
to be used to launder a river of drug money flowing out of Mexico together with
other banking lapses.

Mexico's Sinaloa cartel and Colombia's Norte del Valle
cartel between them laundered $881 million through HSBC and a Mexican unit, the
U.S. Justice Department said on Tuesday.

In a deferred prosecution agreement with the Justice
Department, the bank acknowledged it failed to maintain an effective program
against money laundering and failed to conduct basic due diligence on some of
its account holders.

I
believe that if you had come out firmly and ensured, through your influence in
the Cabinet Office that senior officials in HSBC were prosecuted or at the
least stringently regulated for these offences, I, and the general public would
have more faith in your ethical position over this level of organised banking
crime.

Did
you at any time ask Lord ‘ICannotRecallWhatTimeItIs’ Green of Stay Shtum about
his money laundering policies when he was head of HSBC. Did you not think to find out what
investigations HSBC was subject to when you made him a Peer in 2010? Pretty
neglectful of you, if you don’t mind my saying so! I mean, don’t you people do
any due diligence at all? It’s not like he would have been in the dark about
what his bank was doing!

As
for the latest scams that occurred on Lord ‘IHave’ntAClueWhatYouMean’ of Money
Laundering’s watch, I agree that the provision of bank accounts to high net
worth tax payers to enable them to evade the payment of tax is a very serious
charge to lay at any bank’s door, but you give every impression of being
completely sanguine about the whole affair.

Not
once, as far as I can ascertain, have you raised one word of concern about the
fact that one of the biggest and most prestigious UK banks is alleged to have
conspired with its clients to facilitate tax evasion, a major criminal offence.

You
appear to be unconcerned that in so doing, HSBC were engaged in wholesale
criminal money laundering. It may be that you did not fully appreciate the whole
criminality involved in the process, but that does not excuse you from taking
advice from the Lord Chancellor and the other lawyers, who would have been able
to fill in the gaps in your ignorance.

I
mean, doesn’t it worry you that the UK’s leading banks are now considered by
the regulators of the world’s financial services operators as being on a par
with the world’s leading organised crime gangs. London is considered a safe
haven for every kind of dirty money and the City is nothing more than a sink
which washes every criminal’s dirty dosh down into the offshore sewer. Don’t
rely on my word for the truth of this, ask Alexander Lebdev, owner of the ‘Independent’
newspaper and the ‘Evening Standard’!

How
can you remain so silent when the very nerve centre of our banking and
financial system is the plaything of every international crook, oligarch, money
launderer, tax evader, drug dealer, arms smuggler and state-looting criminal?

Don’t
you know these things are going on every day, and our banking system and our
bankers are on the watch list of every major law enforcement agency in the free
world.

Take
a look at these facts reported in Business Insider magazine and then tell me
you aren’t concerned enough to stand up and say something.

Herve Falciani
worked in HSBC's IT department between 2006 and 2008, when he became a whistle
blower to French authorities.

100,000, the number of HSBC
client accounts under scrutiny related to tax evasion and money-laundering
investigations, involving £78 billion —
the accounts' asset total between 2005
to 2007 — the years in which the account data stems from, involving
203 countries

The other
countries launching investigations into HSBC over client tax evasion and
money-laundering allegations are Belgium, France, Argentina, the US, and
Switzerland.

Are you
worried now, Mr Cameron?

I
believe that your silence in the face of this tsunami of financial crime and
organised criminality taints you and your colleagues. It indicates a total lack
of willingness to do anything to help prevent this level of mafia banking, and
it leaves those of us who care about these things asking whether you care
enough about the reputation of this country to do something effective about it,
or whether your friends in the City are really pulling your strings.

You
would be fast enough to act if this level of financial corruption was being
alleged within a major Trades Union, and you would ensure that all the right
stories appeared in the press saying what you were doing to undermine it!

It
would only take a couple of phone calls from your office to the head of the
FCA, the SFO and the Commissioner of Police for the City to get actions
started. You don’t have to make it public, but we do need to see real action
being taken against these rotten bankers and their criminal satraps.

By
real action I mean a dynamic prosecution policy, the formation of a specialist
task-force of properly qualified and experienced detectives, customs officers
and revenue men and women who could work in multi-agency teams to get the
evidence and then conduct the dawn raids on the homes of senior bank officials,
before preferring selected charges against them.

It
needs concerted action if you are going to win back the reputation for having
the guts to do something about the criminal City, because otherwise, the belief
will continue to be spread abroad that you are their creature, and that you and
yours do not care about financial crime enough to do anything about it.

Worse,
it will reinforce the belief that you and yours are complicit in the wrongdoing
and profiting from it.

Is
that what you want?

There
are more than enough people know who watch and see what is happening and can
provide no explanation for the lack of action by you and your government other
than that you are protecting the money men; and the only charitable explanation
for that protection is that in some twisted perverse way, you think that by
allowing this slew of dirty money to find a safe haven in London, you are
somehow benefiting the UK plc.

You
are not. As fast as that funny money arrives here, it can exit again, when
another safe haven offers better protections to this vast ball of dirty money
which rolls around the globe, looking for a temporary home.

It
is way past time when you, as this country’s leader, should stand up and say ‘enough
is enough’, and task the relevant authorities to put a stop to this level of
sleaze and criminality once and for all.

You
have to put the real reputation of this country and its banking sector ahead of
the short-term profits that your spiv City friends are busily making, managing
the dirty money that is flowing into this country because its criminal managers
know that we are too scared to see it go elsewhere.

This
country and its decent, law-abiding people who pay their taxes and whose money
has already been used to shore up this organised criminal banking enterprise,
deserve no less, and we would like you to know it!

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!